First, neither excess reserves nor the monetary base (currency plus bank reserves) are money.
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The combined total of covered money substitutes plus currency is what economists call the monetary base, and by definition completely under the control of the Federal Reserve.
Central banks control the narrowest measure of the money supply, called the monetary base typically, currency plus the reserves that commercial banks hold with the central bank.
Argentina's inflexible currency-board scheme not only pegs the peso at par to the dollar but limits the money supply to the level of hard-currency reserves, in effect turning monetary policy over to the United States' Federal Reserve.
It is true that the Monetary Base, which used to be considered high-powered money because it consists of currency outstanding plus the reserves of the banking system, expands with the expansion of bank reserves.
Those reserves bloat the monetary base (reserves plus currency outside the banking system), but they have not been used for money-creating bank lending and investing.
With the monetary cards now so clearly on the table, currency traders have placed their bets, and the smart money is quickly running away from the greenback.
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Freely determined market prices and a monetary system that allows the supply of money to meet demand through market processes and a convertible currency ensure long-run prosperity.
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The U.S. dollar is hardly the only currency, and the U.S. Federal Reserve is hardly the only monetary authority that has been increasing its money supply.
The framers, having just experienced the horrors of the Continental currency (which had been used to finance the War of Independence) opted to limit federal monetary powers to coining money, which for legal tender purposes they defined as gold and silver.
What beggars belief is that just as the single currency has ripped away any Euro Zone (EZ), nations ability to control its money supply, set an appropriate interest rate and to float its currency, i.e. monetary policy, the best the Europeans seem to have to suggest is that taxation has to be harmonized as well.
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